Uber started in 2009 and in its ten-year operations has caused much anger because:
- It and other ride-sharing platforms are outcompeting established taxi operations.
- Ride-sharing and other gig platforms do not involve master–servant employment arrangements. This challenges regulators and unions whose regulations and business models are based on master–servant legalities.
The consequence has been that Uber in particular has been subject to legal challenge. At the centre of all these challenges is the claim that Uber drivers are employees and not independent contractors. This question of employee/contractor status is at the core of the legal, social and economic debate over the gig economy. The question is: Can individuals possibly be their own business or are all individuals always in a controlled employment contract?
One of the more quoted cases against Uber involves a 2016 declaration from the London Employment Tribunal that two Uber drivers are ‘employees’ of Uber. In December 2018, Uber lost its first appeal against the decision. Uber is appealing this to the UK’s Supreme Court, the final court of appeal in the UK.
However, the London Employment Tribunal declaration must be understood within the light of the odd definition of ‘worker’ under parts of UK law—namely, that someone can be an independent contractor but declared a ‘worker’ for some aspects of employment-style regulation. It’s a bit like the ‘little bit pregnant’ logic—that is, that someone is not an employee but sort of is! It’s an odd, and we believe illegitimate, twist on the well tested and stable common law difference between an employee and a self-employed person.
If a person is an independent contractor, they work under a commercial contract. When ‘employment’ law treats a commercial contract as if it were an employment contract, this assaults the very contractual core of market-based economies.
The Uber appeal to the Supreme Court must address this odd twisting of UK law, the home of common law. In many respects the Supreme Court must address the illogic of declaring a commercial contract to be a ‘little bit’ an employment contract.
Given the oddity of the London Employment Tribunal’s declaration, it cannot be taken as a global precedent that Uber (or other ride-sharing) drivers are employees. The London declaration in fact does not declare the drivers to be ‘employees’ even though the word ‘employee’ is used in media coverage.
- Here’s the London Employment Tribunal’s declaration.
The Uber ‘battle’ has been significant in the USA. Much of the publicity against Uber has been driven (pardon the pun) by US trial lawyers, principally in Massachusetts and California. Trial lawyers are lawyers who run class actions and take significant slices of any settlements for themselves. These high-profile cases have been counterbalanced by new ride-sharing laws and Court decisions—most notably in Florida.
In July 2017, Florida passed laws declaring that ride-sharing drivers are self-employed, independent contractors. The laws stipulated operational conditions that ride-sharing companies must comply with for the drivers’ independent contractor status to apply. We view the law as being sensible and workable because the law effectively codifies what is contained in common law. Firms that do not comply with the laws are effectively operating sham contracts.
The Florida laws are here. The summary to the law states what is required:
Transportation Network Companies:
- Providing that a transportation network company (TNC) driver is not required to register certain vehicles as commercial motor vehicles or for-hire vehicles;
- requiring a TNC to designate and maintain an agent for service of process in this state; providing fare requirements;
- providing that TNC drivers are independent contractors if specified conditions are met;
- requiring a TNC to implement a zero-tolerance policy for drug or alcohol use, subject to certain requirements;
- requiring a TNC to conduct a certain background check for a TNC driver after a specified period;
- requiring TNC drivers to comply with the non-discrimination policy and certain applicable laws regarding non-discrimination and accommodation of service animals, etc. Effective Date: July 1, 2017
The independent contractor conditions require that ride-sharing companies do
- not unilaterally prescribe specific hours during which drivers should be logged into the digital network;
- permit drivers to work for other ride-sharing services;
- allow drivers to engage in any other occupation or business they desire.
These and other conditions are effectively anti-sham contracting provisions.
As an aside, Florida subsequently passed a law (April 2019) allowing ride-sharing drivers to transport non-emergency medical patients, thereby freeing up expensive ambulances to focus on actual emergency cases. It’s very common sense and forward thinking by the Florida lawmakers.
California and Massachusetts—Trial Lawyers
In 2016 Uber agreed to a $US100m payout to settle two class action lawsuits in California and Massachusetts which started in 2013. The lawsuits alleged that Uber drivers are employees. Under the 2016 settlement Uber agreed to pay 385,000 drivers not to continue a legal case of employment. The lawyers who ran the case were to pick $US21m leaving the drivers with, on average, $205.
In May 2018 the US Supreme Court issued a ruling restricting the ability of trial lawyers to conduct class actions. Following this, in September 2018, the Ninth US Circuit Court of Appeals reviewed the 2016 settlement heavily restricting the settlement. Uber finally settled in March 2019 for $US20m. The settlement reflected Uber’s closing off of legal cases in preparation for its stock market float that took place in May 2019.
What is significant in the California/Massachusetts trial lawyers ‘game’ is that the independent contractor status of Uber drivers has not changed.
Conclusion: Uber drivers’ legal status in the USA
From the foregoing facts and analysis in can safely be taken that the common law status of Uber drivers in the US is somewhat cemented as self-employed, independent contractors. The Florida laws are a sound model which reflect or codify common law criteria. They perhaps represent a workable model across all gig economy-style platforms.
As with most other countries, Uber has created antagonism in Australia. Anger has come principally from taxi licence holders whose licence valuations have collapsed due to ride-sharing competition.
Victorian ride-sharing regulations
Victoria was the first state to respond introducing “Australia’s first fully open and competitive commercial passenger vehicle regulatory model” in late 2017. The Victorian law treats gig workers/drivers as commercial operators, regulating them in the same way as other commercial operators/drivers such as taxi drivers. The Victorian package created a $500m compensation package, principally for taxi licence holders, which was funded by a $1 per trip levy on both taxi and ride-sharing services. These regulations have in many respects been replicated in other states.
Significantly, the Victorian regulations do not seek to declare ride-sharing drivers to be employees. In fact the reverse is the case. Taxi drivers are not employees but instead operate under a contract of bailment. By bringing ride-sharing drivers under the commercial passenger vehicle regulations the non-employee status of Uber and other ride-sharing drivers is very much secured.
Victorian class action
The only pending Australian legal action against Uber of which we are aware is a 2019 (pending) class action in Victoria. The class action does not go to the question of the legal status of Uber drivers. Rather, it seeks compensation for taxi licence holders and others between 2014 and 2017. The action alleges a conspiracy to cause devaluation of taxi licences and loss of income when Uber was operating before the 2017 Victorian regulations.
In early June 2019 the Fair Work Ombudsman released a statement that, after a two-year investigation, it has concluded that drivers working through Uber are not employees. This caused consternation within the Transport Workers Union who described the decision as ‘…devastating for workers in the gig economy’. The Fair Work Ombudsman is an employment regulator not a court. The Fair Work Ombudsman has made its own internal decision as to whether it should consider running a legal case to argue that Uber drivers are employees. On the basis of the Fair Work Ombudsman’s assessment, the drivers are self-employed independent contractors.
The Fair Work Ombudsman’s decision has strong precedent in that it is consistent with a highly detailed investigation and legal ruling on Uber drivers by the Fair Work Commission in December 2017. The Commission is a first-level employment ‘court’ and empowered to rule on legal status.
The ruling found that Uber drivers are not employees but independent contractors.
We analyse this decision in some detail here.
The Fair Work Commission’s 2017 decision is important because it is a common law ruling that follows a proper common law process where the court:
- Looked at the facts of how Uber operates.
- Explained the common law criteria that must be applied.
- Applied the Uber facts to the common law criteria.
- Made a decision based on the balance of the evidence.
Protecting independent contractors—Australian law
In the global debate over independent contractors the allegation is most commonly made by unions and some ‘employment’ academics that independent contractors are ‘unprotected’. On this basis they mount arguments to deny self-employed people their independent contractor status and/or attempt to create a middle ‘little bit pregnant’ category as has happened in the UK (see above).
In Australia significant advancements have been made to ‘protect’ independent contractors without changing their legal status to employment. These protections operate within the ambit of commercial and competition law. They include:
- Small business-to-business unfair contract laws. There are proposals to ‘beef up’ these laws.
- The competition regulator (ACCC) is promoting legislation to enable small businesses to bargain collectively but within competition guidelines.
- Independent contractors are clearly captured within work safety (OHS) laws.
- The Independent Contractors Act (2006) was a world first securing the status of self-employed, independent contractors.